BT's Legal and Consulting Costs Top $625,000
The outside consultants hired by the city of Burlington to help it guide Burlington Telecom through an internal restructuring and external reviews by state regulators have cost the utility more than $625,000 since July 1, 2009.
That's according to a memo sent by City Hall officials to City Councilors Paul Decelles (R-Ward 7) Karen Paul (I-Ward 6). The accounting was also made in response to a records request by Seven Days.
In September, I noted in "Fair Game" that Burlington Telecom's financial and regulatory troubles had racked up close to $500,000 in charges. As of December 21, that figure sits at $625,063, according to Scott Schroeder, the city's assistant chief administrative officer.
In all, the city has paid out more than $245,000 for legal and regulatory services, which includes $64,000 toward the recent Larkin and Associates report conducted for the Department of Public Service. DPS officials told Seven Days the full cost of the report was $85,000 and would be billed to Burlington Telecom.
City officials have not yet responded to Seven Days' query about the dollar discrepency discrepancy. *(see below for response)
In addition, two payments for legal and consultancy fees were paid for out of the city's general fund and not direct by Burlington Telecom. One was for $2960 to the firm of Langrock, Sperry & Wool, and another $5740 was paid to Stratum Broadband as part of its work earlier this year analyzing BT's business plan. City officials have not yet said whether those costs were repaid by BT.
According to an agreement with the Public Service Board and as a result of the civil lawsuit against Burlington Telecom, the utility is supposed to pay for all its own expenses without support from taxpayers.
Burlington Telecom has also paid out more than $379,000 to various consultants, including consultants hired to examine BT's operations for the so-called "blue ribbon" committee earlier this year.
The charges will continue to mount, given BT's ongoing regulatory problems and the on-site consultants who are running BT's day-to-day operations.
Dorman & Fawcett receives a base fee of $3000 per week, along with $1600 per day for D&F founder Terry Dorman if he does anything besides manage BT and negotiate with creditors. Other D&F senior staff are paid between $950 and $1600. In addition, Hiawatha, which earlier this year conducted a review of BT's business plan, charges the city a flat fee of $7000 per month as part of its work to restructure BT with Dorman & Fawcett.
Download the memo from the city to the city council: Download Memo_to_City_Council_-_BT_Professional_Services_Final
* Update *
Mayoral assistant Joe Reinert emailed this reply to Seven Days' query regarding the consultancy costs paid for by the city out of it's general fund rather than Burlington Telecom:
The costs allocated to the General Fund are for work associated with fulfilling responsibilities that are directly those of the City of Burlington and are not exclusive to Burlington Telecom. The Dorman & Fawcett costs are for implementing the recommendations of the Blue Ribbon Committee, as approved by the City Council, including the negotiations with CitiCapital on restructuring the lease agreement, the development of an alternative organizational structure, potentially involving a new ownership and governance structure of BT, seeking private partners, and/or the creation of a new entity. Further, it is our understanding that much of the D &F financing work is likely to be reimbursed at closing of a new financing.
Additionally, Reinert tells Seven Days that Burlington has incurred no out of pocket costs related to the ongoing civil litigation. These costs are being covered by the city's insurance company, Traveler's.